Fraud from abroad

Vaughn Nelson had done well as an investor in the 1990s, regularly racking up annual returns of 23-to-25 percent in both his 401(k) and his outside investments.

Then a longtime business associate offered Mr. Nelson an even better deal: 23-to-25 percent monthly returns from loaning money to big, though unnamed, banks in Europe. The friend added that he had $120,000 of his own in these "offshore investments."

So the Salt Lake City businessman plowed $6,000 into the venture. It quintupled in a matter of months. With returns coming through as promised, he tapped his retirement plan for $50,000. That money was lost.

Nelson now says the associate lied to him and has since been convicted of securities fraud in connection with a "prime bank" scheme; a swindle that authorities estimate annually pulls $1.75 billion from the wallets of people nationwide.

From bank-loan scams to Nigerian advance-fee swindles to good old pyramid schemes, fraud is alive and well in America.

One top fraud-buster, Alabama Securities Commissioner Joseph Borg, believes the economic downturn from which the US appears to be emerging has boosted the flim-flam industry. With the stock market generating little income for investors, more and more people grab deals that they might have considered too risky in the past, he maintains.

"They're still looking for someplace to put money," says Mr. Borg. Because people became used to 20 percent yearly returns in the mid-1990s, propositions offering even greater riches haven't set off the alarm bells they once did.

Borg, who also is chairman of the North American Securities Administrators Association (NASAA), says people who steered clear of the stock market are vulnerable, too. If they had money in certificates of deposit, they've felt cheated the past year as they rolled over accounts earning 8 percent into ones gaining 2 percent or less.

Embarrassed victims don't tend to step forward, so accurate records on the numbers of people swindled, and amounts taken, are impossible to come by.

However, Ashley Baker, a spokesman for NASAA, says that in recent meetings of group members "everyone was seeing more of this, not less."

Some of the scams are twists on old standards, such as "gifting" programs that cite Internal Revenue Code that allows anyone to give anyone else $10,000 yearly, tax-free. Sometimes called Season of Sharing, or Women Empowering Women, the cons target women and are, in fact, illegal pyramids that have prompted warnings from the IRS for violating gifting statutes.

The US Secret Service has set up a task force to combat the Nigerian fee swindle. In this ruse, a letter arrives at home or work one day postmarked Nigeria, Togo, or some other West African country.

The letter writer claims to be working with Nigeria's national oil company, for instance, in such a high-level capacity that he or she has been able to siphon off tens of millions of dollars from contracts.

The executive has no way to get the funds out of the country, unless the American would kindly provide his or her bank account number so that the money can be transferred.

Of course, the American will get a fat percentage of the take. And, of course, anyone falling for this will have his or her banking accounts looted in the blink of an eye.

Page: 1 | 2